DATE: July 10, 2019 TO: Board of Commissioners FROM: Kimberly Branam, Executive Director SUBJECT: Report Number 19-32 Adopt Findings in Support of and Exempting the 100 Multnomah Design-Build Contract with Mortenson Construction, Inc. from Competitive Bidding and Authorize Entering into a Design-Build Contract with Mortenson Construction, Inc. BOARD ACTION REQUESTED AND BRIEF DESCRIPTION Adopt Resolutions No. 7323 and No. 7324 Staff are requesting the Prosper Portland Board of Commissioners (Board) take two actions at their July 10, 2019 meeting to further advance the design of 100 Multnomah, a proposed office building to be built adjacent on top of the seven-story, 442-space Convention Center Garage (Garage) that is currently under construction on the southwest corner of NE Multnomah Street and NE 2nd Avenue in the Oregon Convention Center tax increment finance (TIF) district (see a project summary in Attachment A): 1. Serving in its capacity as Prosper Portland’s Local Contract Review Board (LCRB), the Prosper Portland Board will adopt Resolution No. 7322 in support of an exemption from the general rule of low-bid solicitation a Design-Build Contract with Mortenson Construction, Inc. (Mortenson Construction) for the design and construction of 100 Multnomah. If approved, the resolution will exempt the 100 Multnomah from the low-bid solicitation requirements in accordance with Oregon Revised Statutes (ORS) 279C.335. ORS 279C.335 and Prosper Portland’s LCRB Administrative Rules (LCRB Rules) provide that the LCRB may exempt certain public contracts from the low-bid process upon the LCRB making the following findings: a. It is unlikely that such exemption will encourage favoritism in the awarding of a public contract or substantially diminish competition for the contract; and b. The awarding of public contract under the exemption will result in substantial cost savings to the agency. 2. Should the LCRB approve Resolution No. 7323, staff will then request the Prosper Portland Board approve Resolution No. 7324, which would authorize a Design-Build Contract with Mortenson Construction, increasing Prosper Portland’s investment by $1,492,620 to complete 100 percent construction documents and permitting for 100 Multnomah. This increases the total Prosper Portland investment for design services for 100 Multnomah to $3,094,672. The Design-Build Contract includes a $52,252,538 preliminary budget for total construction costs for and contemplates that Prosper Portland and Mortenson Construction will agree upon the final budget (Contract Price) and final schedule upon completion of 75 percent construction documents subject to future Prosper Portland Board approval. Board Report – 100 Multnomah Office Building Design-Build Contract June 10, 2019 Page 2 of 6 STRATEGIC PLAN ALIGNMENT AND OUTCOMES Entering into the Design-Build Contract will enable Prosper Portland to complete the design, permitting, and construction of 100 Multnomah, an approximately 120,000 square foot, nine-story office building on top of the Prosper Portland-owned Garage. This initiative aligns with Prosper Portland goals for: (1) creating healthy, complete neighborhoods by contributing to the continued growth and tenanting of the Lloyd District and the Convention Center area as a mixed-use, transit-oriented employment center; and (2) supporting the agency’s financial sustainability, since this will maximize the development of the property’s air rights and provide an opportunity for Prosper Portland to participate in the financial benefits of developing the air rights. BACKGROUND AND CONTEXT Background. The Oregon Convention Center Urban Renewal Plan was adopted in 1989 with the primary goal of establishing “at least one headquarters hotel in the immediate vicinity of the Oregon Convention Center to capitalize on the convention center’s capacity.” The 600-room Hyatt Regency Portland at the Oregon Convention Center (Hotel) is currently under construction and is anticipated to open in winter 2020. Through the Hotel design and development process, Prosper Portland, Metro, Mortenson Development, and Hyatt determined that the Hotel’s parking needs would best be met through construction of a stand-alone parking structure on the adjacent 0.88 acre Prosper Portland property known as Block 49. Through Resolutions No. 7165 (February 10, 2016) and No. 7222 (December 14, 2016), the Prosper Portland Board authorized entering into a Parking Structure Development Agreement with Mortenson Development to construct a 442-stall, seven-story parking garage (Garage) on Block 49 for an amount not to exceed $32,200,000 to support the development and operation of the adjacent Hotel. The cost of constructing the Garage included the foundation and superstructure within the Garage to support future development of an office tower above. The Garage is currently under construction and is anticipated to be completed in summer 2019. During the Garage design and development process, the site was identified to have additional development capacity. Based on this, Prosper Portland directed Mortenson Development to prepare a preliminary plan to develop an approximately 100,000 square foot office building served by two additional levels of parking on top of the Garage. Mortenson Development completed this work and incorporated into the Garage design the systems and foundation superstructure necessary to support the proposed office building. On February 14, 2018, the Prosper Portland Board, acting as the agency’s Local Contract Review Board (LCRB), approved Resolution No. 7263, which authorized entering into a Pre-Development Services Contract with Mortenson Construction for $477,593 to complete Conceptual Design and associated cost estimate for 100 Multnomah and exempting the Contract from low-bid solicitation. Prosper Portland and Mortenson Construction subsequently entered into the Pre- Development Services Contract on July 12, 2018, with that work completed between July and December 2018. On January 16, 2019, the Prosper Portland Board approved Resolution No. 7299 to authorize the next design phase necessary to achieve approval by the Portland Design Commission by advancing the design through schematic design and 50 percent design development. The authorization increased the agency’s commitment in 100 Multnomah to $1,602,052; this work is now nearly complete. Design-Build Contract. A Design-Build Contract is a project delivery system used in the construction industry in which the design and construction services are contracted by a single entity knows as the design-build contractor. The benefits of a Design-Build Contract include integrating design, constructability, and cost estimating; incorporation of value engineering into the design process from Board Report – 100 Multnomah Office Building Design-Build Contract June 10, 2019 Page 3 of 6 the outset; enhanced communications between the design and construction teams; and a single point of contact and responsibility for cost, schedule, and delivery. A Design-Build Contract with Mortenson Construction is proposed as an alternative to low-bid contracting for 100 Multnomah. Mortenson Construction is part of the team competitively selected by Metro – owners and operators of the Oregon Convention Center – for the development and construction of the Hyatt Regency at the Oregon Convention Center Hotel (Hotel). Mortenson Construction was selected to construct the Garage as the guaranteed delivery of the Garage concurrent with the Hotel was essential. As noted above, Prosper Portland subsequently contracted with Mortenson Construction for pre-development services for 100 Multnomah through 50 percent design development. Through the experience of designing and constructing the Garage, and the pre- development design of 100 Multnomah, Mortenson Construction and its associated team members have gained intimate knowledge of the design and engineering of the combined structures, and is uniquely suited to continue to the coordinated design, permitting, and construction. Selecting Mortenson Construction as the design-builder for 100 Multnomah gives no rise to favoritism or diminished competition and will result in substantial cost savings or other substantial benefits including as described in the findings attached to Resolution No. 7322. The Design-Build Contract includes $1,492,620 for design-build services including preparation of architectural designs and specifications for 100 percent development, 75 percent construction documents, and 100 percent construction documents. This increases the total Prosper Portland investment for design services for 100 Multnomah to $3,094,672. The Design-Build Contract is a lump sum contract which anticipates that Prosper Portland and Mortenson Construction will agree upon a Contract Price for construction of 100 Multnomah upon completion of the 75 percent construction documents and specifications. The Contract Price and final schedule will be agreed upon through a Change Order to the Design-Build Contract which will require approval by the Prosper Portland Board. Other major terms of the Design-Build Contract include: • The Design-Build Contract can be assigned by Prosper Portland with written approval by Mortenson Construction; • The Design-Build Contract can be terminated by Prosper Portland with a $250,000 payment to Mortenson Construction for authorization to use the work product; and • In the event Mortenson Construction does not deliver 100 Multnomah by the substantial completion date, liquidated damages will be assessed